Other people’s money

Michael Reddell Reserve Bank

Our taxes –  explicit or otherwise – pay for the whims and initiatives of politicians and public servants.  One might like to think that these people would spend our money at least as abstemiously as they would spend their own –  rather more so, one might hope, since they know they’ve taken it from us coercively.   For those given to personal extravagance we might hope they’d be particularly conscious of the need to avoid taking the same approach with other people’s money.

But the incentives are all wrong aren’t they?  It is not their own money, so why would they be anywhere near as careful with it as they would with their own?

At least politicians are in the public spotlight (even if the OIA still doesn’t apply to MPs), visible in their local communities.  Ministers face possible questions in the House each week, and all politicians face the threat of loss of office, perhaps loss of job altogether.   Elections do something to sharpen the focus of accountability.

And Cabinet ministers are accountable for government departments,  themselves funded by annual parliamentary appropriation, a cornerstone of the protections for citizens built into our system.

There are no such protections when it comes to the Reserve Bank.    All spending (and other management) decisions are made by one unelected official, not even directly appointed by a minister.  The Governor is, notionally, overseen by the Bank’s Board, but historically they’ve seen their primary role as championing the Governor, not protecting the interests of citizens.  And there are no annual appropriations.  By law, the Bank can spend whenever it likes – and, after all, it “prints” the stuff (electronic and physical).  The law provides for a (voluntary) five-year funding agreement, and if such an agreement is signed it is subject to ratification in Parliament.  But the Bank discloses the same level of detail about its plan for spending over the following five years as, say, the SIS does.  And, unlike the SIS, not even that one line number is binding.   It is, of course, all but impossible to get rid of the Governor.  In other words, little or no effective accountability around their stewardship of our money.

In recent decades, the Bank has tended to be a relatively abstemious place, partly reflecting the influence and example of Don Brash.   Arguably, in some areas, it even overshot a little.  But the culture of excess seems to be creeping back in: not so much gold-plating working conditions or salaries, but other sorts of waste.  Take this advertisement from the Dominion-Post this morning.

RB maori advert

Perhaps there are dozens, even hundreds, of such positions around the myriad of public sector agencies.  In some cases, it probably even makes sense for such positions to exist.

But this is the Reserve Bank.  It does three main jobs, none of which ever involve dealing directly with the general public; Maori, European, Chinese, Mexican or whatever:

  • the Bank issues bank notes and coins.  That involves purchasing them from overseas producers, and selling them to (repurchasing them from) the head offices of retail banks;
  • it sets monetary policy.  There is one policy interest rate, one New Zealand dollar, affecting economic activiity (in the short-term) and prices without distinction by race or culture.  Making monetary policy happen, at a technical level, involves setting an interest rate on accounts banks hold with the Reserve Bank, and a rate at which the Reserve Bank will lend (secured) to much the same group.  The target – the inflation target, conditioned on employment (a single target for all New Zealand) – is set for them by the Minister of Finance.
  • and it regulates/supervises banks, non-bank deposit-takers, and insurance companies, under various bits of legislation that don’t differentiate by race or culture.

Sure, there is a handful of other functions.  They can intervene in the foreign exchange market (one dollar for all), and they operate a wholesale payments system (NZClear), but it doesn’t  alter the picture.  There is just no specific or distinctive European, Maori, Pacific, Chinese, Indian or whatever dimension to what the Bank does (or what Parliament charged it with doing).

But the new Governor –  49 weeks in and still no substantive speeches about things he is actually responsive for –  is clearly enamoured of things Maori.  A fine thing no doubt for him personally. But here he is running a major public agency, using public money.

So what is he up to with his “Te Ao Maori strategy..designed to build a bankwide understanding of the Maori economy”?  Given his statutory responsibilities –  and those in charge of public agencies are supposed to operate constrained by statute – what makes the so-called “Maori economy” any different than the “European New Zealander economy”, the “Asian economy”, the “British immigrant economy”, the “Pacific economy” and so on, for Reserve Bank purposes and policy?

The Bank’s claim is that this new understanding will “enable improved decision making…about monetary policy and financial soundness and efficiency”.   Yeah right.

Monetary policy operates in much the same way whatever the colour of skin, or  culture, of the agent.  Bank notes are as useful to us all.  And financial sector regulation isn’t going to be –  or shouldn’t be –  any different.  Perhaps we’ll have a Presbyterian cultural competency adviser next, or a Catholic culture one?

It all has the feel of personal virtue-signalling at your expense and mine; the Governor pursuing his political or other personal aspirations, rather than being a position a high-performing Reserve Bank actually needs.

Anyway, you can read the rest of the advert for yourself, including noting that this isn’t just one position.  This “cultural capability advisor” is to work with the “Project Manager (Te Ao Maori strategy)” already in place.

Arguably, this specific position is less ridiculous than the whole “Reserve Bank as tree god” nonsense the Governor continues to expound, complete with the island vision, that just happened to be represented in his glossy pamphlet by the rather expensive foreign resort of Bora Bora.

RB island

But if it is less ridiculous, it is even more wasteful – annual salaries for experienced “cultural facilitators” won’t come cheap.   The present value cost of this initiative is at least $1 million (I’ve lodged an OIA request for the relevant background papers and costings).

Just a week or two ago, the Deputy Governor claimed that the Bank needed more resources to do properly its financial regulation role (I even expressed some mild sympathy for that position).  Not on the evidence of this advert, which suggests a very curious sense of priorities.

But if they do have that sort of money floating around, it might be considerably more productive –  and more attuned to their statutory responsibilities –  to, for example, conduct and publish some serious research and analysis around their aggressive bid to require banks to have much more capital funding, or to respond to some of the critiques that Ian Harrison posed in his paper earlier this week.   Serious money is at stake in what they propose –  billions of dollars.   But that isn’t the Governor’s money, or the Bank’s.  It was –  or would have been –  your money and mine.  Only the Bank proposes to, on its own numbers, obliterate –  billions of dollars of future income we’ll just never have, in pursuit of an exaggerated uncertain saving decades hence, not grounded in serious analysis.

But no doubt the Governor will be welcome at all those “powhiri, whakatau, wananga, hui and other engagements”.

It is nonsensical virtue-signalling, without substance.  And at your expense, not the Governor’s.

26 thoughts on “Other people’s money”

  1. As the story goes, there is only four ways to spend money:

    1) Your own money on yourself.

    2) Your own money on someone else.

    3) Someone else’s money on yourself.

    4) Someone else’s money on someone else.

    Human nature being what it is, the most care is taken when engaging in option (2), the least care in option (4).

    Governments and their functionaries operate in the realm of option (4).

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  2. Perpetuating the endless victim hood culture !!!
    But let us not forget the bank is now responsible for the prosperity and the well being of New Zealanders

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  3. Yes this would appear to be just another example of meaningless, wasteful virtue-signalling so prevalent in the wider public service. For many years now public servants’ annual assessments have included a checklist of categories such as “responsiveness to Maori” where employees are rated on whether they have performed their duties in accordance with Geoffrey Palmer’s mysterious, undefined “Treaty Principles” etc. Membership of departmental kapa haka groups and maraes has blossomed as staff have gone the extra mile to demonstrate their reverence for all things Maori in the hope of earning a favourable mention from their supervisors. The Reserve Bank is bending its knee to this long established and so very Wellington cult of racial pandering and quackery.

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    • The treaty principles are well defined. There is Maori as a separate sovereign nation and there is the British Crown that have stolen from them. Then there is the other people called Aoteroans whose only rights are to pay to taxes to the British Crown so that treaty settlements can be funded.

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      • There has not been a NZ government for some time now. Our government is the Colonial British Crown as far as the principles of the Treaty of Waitangi is concerned.

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      • Since i’m idly filling in time waiting for a child, I would point out that the Treaty of waitangi has no legal force in and of itself. It may have moral force, and bits of it – or derived creatively from it- have been imported into specific statutes by Parliament. In the nz system parliament is sovereign.

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      • Since the enactment of the Treaty of Waitangi Act in 1975, it is increasingly becoming quite clear that there is no longer a New Zealand government. What we have as far as the treaty is concerned is the Colonial British Crown in all its glory and the Maori people are a separate sovereign nation that still demand full and fair compensation for the theft of 98% of its lands and wealth. The treaty of Waitangi settlements to date only represent 2% of what is still owed to them.

        We are seeing this in every document issued by every government department. The clear reference to the British Crown and to Maori as a sovereign nation.

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      • The bigger picture is becoming clearer. When Jacinda Ardern(Taxinda) and Grant Stalin Robertson talks about Fairness, it is not a reference to intergenerational fairness. When they refer to levelling the Playing field, it is not about intergenerational level playing field. It is about increasing the Treaty of Waitangi settlement payments and the CGT at 33% is intended only to all other New Zealanders and not to Maori. 17.5% to Maori is just a smoke screen. There will be sufficient exemptions to ensure Maori does not get a CGT. The CGT is intended to return 98% of New Zealand to Maori over time.

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      • You are Maori only if you can identify your lineage to a Maori Iwi. So don’t lose those birth certificates of your Maori great great grandparents. One chap mentioned to me at the office that perhaps identifying with a Urban Maori would be sufficient. Somehow I think that that is not going to suffice. Maybe I should just register on the Maori Electoral Register and hope that in the future they just think I have Maori Lineage? Should be easy now when it is still early days and they are desperate to increases the numbers which will give them more Maori seats in parliament..

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      • The Treaty is between Maori and “the Crown”. The Crown is a cypher for “the People”. The treaty also has to be agreed upon by “the People” at the present time or the Crown has no legitimacy? I don’t think general or local body elections count as legitimacy if the people are not (also) on board?

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  5. ““Te Ao Maori strategy..designed to build a bankwide understanding of the Maori economy””.

    Checking the definition of ‘Economy’: the state of a country or region in terms of the production and consumption of goods and services and the supply of money.

    It seems the RB is planning for a distinct supply of money for Maori. I’ve limited knowledge of pre-European contact Maori but assume they used a barter system similar to Papua New Guineans with a reliance on public ceremonies for significant exchanges and strong long memories. It makes no sense for a separate uniquely Maori economy to have the same Asian-European coin and note money system so it is probable the RB’s plan is based on something highly valued and indestructable – a ‘jade standard’ rather similar to the old gold standard. Maori cannot be expected to depend on a system of money that is based on a kind of intangible promise. Checking a NZ banknote and it says “This note is legal tender for twenty dollars” but do not understand what that means. I’ve ignored bitcoin but will certainly get a few Jade tokens when the RB issues them even if they have the governor’s head on them.

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    • I think it is more likely a preparation to show Maori legends and heroes on our currency and to start to minimise our British history and heritage.

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      • I have noticed that each new currency $20 issued is of an older Queen Elizabeth. I think when she passes, we will show a Maori King instead of a new British Monarch.

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    • FYI – Apparently there is a “Maori Economy”

      February 20 – Last week Getgreatstuff claimed that Maori IWI have $60 billion in assets that aren’t working hard enough. He quoted a report by Chapman Tripp. Finally got around to reading the report. It states that the $60 billion is NOT the sum of the assets of the IWI but the GDP size of the Maori economy

      The question that this poses is the current size of the NZ economy is $300 billion. Which means the Maori economy is 20% of the total NZ economy – even allowing for the impediments placed by the banks on lending to Maori IWI using traditional Maori Lands as security

      Chapman Tripp report

      Click to access 2017%20Chapman%20Tripp%20Te%20Ao%20Maori%20-%20trends%20and%20insights%20E-VERSION.pdf

      Maori IWI and non-affiliated Maori own 9% of the land mass of the North Island. the difficulty for Maori is much of the traditional Maori Land is held in the names of the hundreds of owners who proliferate as the part ownership is handed down to the offspring. The retail banks will not lend on the security of this land. Shane Jones has made comment on this. In the Chapman Tripp report there is mention of the NZ Super fund becoming involved. There’s your connection to Adrian Orr. The unwillingness of the banks to provide funding to a large proportion of the economy is a serious impediment. Which brings in the RBNZ. And why not?

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      • Would you lend on land where the owners are legion and can’t agree among themselves on minor matters let alone provide security for any lending as a group or individually… as the land itself would be no security at all as any default would not be cover by sale of the land…. it would be a political nightmare!!!

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      • Liz Te Amo is well placed to assess how Maori are leveraging their $50 billion plus in land and sea-based assets. The Tauranga-based champion of Maori business growth draws on 30 years working in this arena when she gives her verdict on the degree to which her people are leveraging opportunities in extracting the greatest value from those assets.

        “Even though we have a $50 billion asset base, we are very much an emerging economy.”

        https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12091290

        Iconoclast, sorry, did I use the wrong reference? Here is one reference from the NZherald that refers to $50 billion assets in 2018. $60 billion in 2019 would be a reasonable estimate given the excessive amounts freely gifted through Treaty settlements in the form of annual NZ taxpayer cash and NZ taxpayer land assets(or in Treaty of Waitangi terminology – British Crown stolen cash & land assets) over the year.

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      • Take Nghai tahu- you only need one ancestor and the whole South Island was your “land’. Elizabeth Rata criticises the “tribe” as not being a tribe in an anthropological sense but actually a corporation.

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  6. Meanwhile, we are almost the only country in the OECD with a quarterly CPI series. So the major focus of the bank on inflation is driven to a significant extent on information up to 3 months stale.

    The cost of getting a monthly CPI – which the IMF usually insists on even in frontier economies – is trivial.

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  7. Oh and while they’re at it, how about properly finding the HLFS. It was comically embarrassing to me to explain to foreign investors in London this week why they’d lost money in the last release because the market over reacted to the unemployment figure which was distorted by poor reporting in Manawatū-Whanganui.

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